TIDMCWP TIDMUTC
RNS Number : 8948D
Clipper Windpower Plc
10 December 2009
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Not for release, publication or distribution, in whole or in part, in OR into
any jurisdiction where to do so would constitute a violation of the relevant
laws of such jurisdiction.
10 December 2009
UNITED TECHNOLOGIES CORPORATION TO INVEST GBP126.5 MILLION ($206 MILLION) NEW
EQUITY INTO CLIPPER WINDPOWER PLC
SUMMARY
* Clipper Windpower Plc ("Clipper" or the "Company") is pleased to announce
agreement of a GBP126.5 million (equating to $206 million based on an exchange
rate of GBP1.00:$1.63) subscription into Clipper by United Technologies
Corporation ("UTC"), one of the world's leading industrial companies and
provider of high technology products and services.
* UTC has agreed to conditionally subscribe for 84,337,124 Shares at a
Subscription Price of GBP1.50 per Share, representing approximately 39.3 per
cent of the Enlarged Issued Share Capital of Clipper (the "Subscription").
* Additionally, UTC has confirmed it intends to launch a partial cash offer,
conditional (among other matters) on the Subscription, to purchase up to
21,804,559 (the "Target Number") Clipper Shares from existing Shareholders at a
price of GBP1.80 per Share, thus increasing its ownership of the Enlarged Issued
Share Capital up to approximately 49.5 per cent.
* In the event that UTC receives tenders for fewer Shares than the Target Number,
certain Shareholders have entered into a call option with UTC pursuant to which,
subject to completion of the Subscription, they will sell sufficient shares to
ensure UTC obtains ownership of 49.5 per cent of the Enlarged Issued Share
Capital.
* The Subscription is subject to, inter alia, Shareholder approval. The issue and
allotment and the issue of Shares pursuant to its terms is projected to take
place on 12 January 2010.
* Clipper expects the Subscription to:
o significantly strengthen Clipper's balance sheet and enable Clipper to
enhance its
operations and pursue its strategic initiatives;
o
facilitate financing of Clipper projects by traditional project financing
sources;
o represent a strategic investment by a global and highly
respected company providing
access to UTC's support and expertise in
areas of manufacturing, product quality and other
industrial
processes;
o strongly position Clipper to pursue the opportunities
expected to become available through
any growth in the U.S. and
offshore wind markets over the coming years; and
o allow existing
shareholders to continue to participate in the Company, sharing in the
potential upside from a market recovery and any resulting growth of the
Companys
operations.
Commenting on the transaction, Clipper's President and Chief Executive Officer,
Douglas Pertz, said:
"This is a transformational transaction for Clipper, bringing substantial
capital from a strategic investor who is one of the world's leading industrial
technology companies. We welcome the investment from UTC and their confidence in
Clipper's technology and business opportunities. Our relationship with UTC will
enable Clipper to access UTC's support and expertise in areas of manufacturing,
product quality and other industrial processes, while providing Clipper with
equity financing to deliver our longer-term strategic goals. Following this
transaction, we believe there is a tremendous opportunity for Clipper to grow
its market share and take its world-class technology to new markets."
This announcement contains forward looking statements relating to a transaction
and anticipated benefits of the transaction that remain subject to uncertainty,
including but not limited to statements relating to anticipated timing of the
transaction, the impact on Clipper's financial position, ability to pursue
future opportunities, manufacturing and other processes and growth. Important
factors that could cause actual results to differ materially from those
anticipated include delays in or inability to obtain necessary regulatory
approvals on acceptable terms; changes in anticipated economic conditions;
challenges in the design, development, production and support of advanced
technologies; delays in achieving anticipated cost reductions; and delays in and
disruption in delivery of materials and services from suppliers. Due to such
uncertainties and risks, readers are cautioned not to place undue reliance on
such forward looking statements, which speak only as of the date hereof. Clipper
disclaims any obligation to update any forward looking or other statements
contained herein, except as required by applicable law.
Clipper will be hosting a conference call at 9 am London time this morning. Dial
in details for the call: +44 (0)207 806 1955 for UK toll; +1 718 354 1389 for US
toll; Code 9794156. There will be a replay of the call, please refer to
www.clipperwind.com for details.
Contacts
Clipper Windpower Plc
Douglas Pertz, President and CEO
Michael E. Keane, Senior Vice President and Chief Financial Officer
Tel: +1 805 690 3275 (US)
Jenny Matthews
Investor Relations
Tel: +44 207 840 9581
J.P. Morgan Cazenove
Patrick Magee
Alex Yule-Smith
Tel: +44 (0)20 7588 2828
Goldman Sachs
Brian W. Bolster
Tel: +1 212 902 2649
M:Communications
Patrick d'Ancona / Charlotte Kirkham
Tel: +44 (0)20 7920 2331
Information on UTC
UTC is a global provider of high technology products and services to the
building systems and aerospace industries. Its principal operating units include
Otis, Carrier, UTC Fire & Security, Pratt & Whitney, Hamilton Sundstrand and
Sikorsky. Otis, Carrier and UTC Fire & Security serve customers in the
commercial and residential property industries worldwide. Carrier also serves
commercial, industrial, transport refrigeration and food service equipment
customers. Pratt & Whitney, Hamilton Sundstrand and Sikorsky primarily serve
commercial and government customers in both the original equipment and
aftermarket parts and services markets of the aerospace industry. Hamilton
Sundstrand and Pratt & Whitney also serve customers in certain industrial
markets, including power generation.
UTC employs approximately 210,000 people and operates in more than 180
countries. UTC is quoted on the New York Stock Exchange with a market
capitalization of approximately $64 billion. For the year ended 31 December
2008, UTC revenues were $59.8 billion.
Additional information regarding UTC which has been publicly filed with or
furnished to the SEC and which is not required to be included as part of this
announcement may be obtained by Clipper Shareholders via the SEC's EDGAR filing
system, accessible from the SEC's website at www.sec.gov.
Background to and reasons for the Subscription and the Partial Offer
(i) Background to the Subscription and the Partial Offer
Recent global economic, market and credit conditions have resulted in
significant difficulties for the US wind industry and Clipper, and have
dramatically reduced the availability of financing for wind projects over the
past year. Some of Clipper's customers have responded by deferring the
construction of wind projects and reducing capital budgets, thus delaying
current turbine orders and associated milestone payments.
In addition, Clipper has incurred significant expense to complete remediation
activities in 2009, and to bring the Liberty turbines to high levels of
operating reliability and performance. The total direct and indirect costs of
remediation programmes has exceeded $330 million since January 2007. The impact
of this expenditure on the financial position of Clipper has made it difficult
for projects using Clipper turbines to raise money from traditional project
financing sources and, as a result, while the financial markets for wind
projects have now begun to recover, Clipper has not yet been able to fully
benefit from this recovery.
Furthermore, lower energy prices and reduced energy demand, coupled with a
collapse in the tax equity market and delays in new government support have
dramatically reduced the U.S. wind energy market.
The combination of these factors has led the Board to consider various means to
finance the Company's ongoing operations. The Company announced on 30 September
2009 that, as a result of a comprehensive review process, the Board had
initiated discussions and received approaches from a number of parties including
both industrial multinationals and financial investors that could lead to a
significant investment in the Company or to the acquisition of the Company. UTC
was one of these parties.
In entering into these discussions, and in its conduct of them, the Board has
considered the long-term positive potential of the Company as well as:
* the business outlook for the Clipper Group, and, in particular, the difficult
economic and trading environment in which it operates;
* the losses that Clipper has incurred since flotation and, in particular, the
loss of US$120.2 million in H1 2009 and the further expected operating losses in
H2 2009;
* the remediation costs that have been incurred since the start of 2008;
* the need for the Company to have a strong balance sheet in order to provide
confidence to customers in the financial stability of the business;
* the negative net asset position of the Clipper Group which was a net deficit of
US$218 million as at 30 June 2009 and the likely requirement for additional
finance to be raised for Clipper to continue operations in the current
environment; and
* the cash balances of Clipper which have declined substantially during 2009.
In arriving at its decision to recommend the Subscription, the Board has taken
into account the strength of the Subscription as an option relative to other
available proposals, together with the potential benefits of UTC as a long-term
business partner, including the potential for operating synergies and expertise
in areas in areas of manufacturing, product development and other industrial
processes.
(ii) Reasons for the Subscription
Clipper expects the Subscription to:
* significantly strengthen Clipper's balance sheet and enable Clipper to enhance
its operations and pursue its strategic initiatives;
* facilitate the financing of Clipper projects by traditional project financing
sources;
* represent a strategic investment by a global and highly respected company
providing access to UTC's support and expertise in areas of manufacturing,
product development and other industrial processes;
* strongly position Clipper to pursue the opportunities expected to become
available through the growth in the U.S. and offshore wind markets over the
coming years; and
* allow existing Shareholders to continue to participate in the Company, sharing
in the potential upside from a market recovery and the resulting growth of the
Company's operations.
Alongside the proposed Subscription, the Board has negotiated certain provisions
to protect the position of the existing Shareholders (which are summarised in
Appendix 1).
(iii) Reasons for the Partial Offer
UTC has proposed the Partial Offer as:
(i) it will allow UTC to increase its holding from 39.3 per cent. following the
Subscription to approximately 49.5 per cent. following the successful completion
of the Partial Offer; and
(ii) it provides existing Shareholders with the opportunity to sell some or all
of their Shares, at a premium to the recent market price.
Shareholders should be aware, however, that those who successfully tender their
Shares will forego any future upside or downside in respect of these Shares in
the Partial Offer. For these reasons the Directors are not making a
recommendation regarding whether Shareholders accept the Partial Offer.
Shareholders should also note that the details of the Partial Offer provide a
pro-rata scaling back of tenders in order to ensure that UTC holds approximately
49.5 per cent. of the Company following successful completion of the Partial
Offer. As such, the Partial Offer does not guarantee a complete exit for
Shareholders. The Directors recommend that each Shareholder takes into account
these factors, together with their own views on the future prospects of Clipper,
before deciding whether to tender their Shares.
The successful completion of the Partial Offer and the Subscription will mean
that UTC will own approximately 49.5 per cent. of the outstanding issued share
capital in the Company. The Partial Offer is, amongst other things, subject to
the Resolution set out in the Notice of GM having been passed without amendment.
Shareholders should also note that if the Partial Offer is not fully subscribed,
a number of Shareholders including OEP Wind Holdings LP and James G.P. Dehlsen
together with his associated family holdings, have agreed to offer their Shares
to UTC on a pro-rata basis between such Shareholders, such that the Shares
acquired by UTC under the Partial Offer and Shares sold under these arrangements
total 21,804,559 Ordinary Shares.
Current Trading and Prospects for the Clipper Group
(i) Macro Economics
During the last 18 months, there has been significant global volatility in the
energy and financial markets, which has created a challenging operating
environment for the U.S. wind energy industry and for the Clipper Group. Since
September 2008 this volatility has affected commodity prices, credit
availability, equity values, and most significantly for the Clipper Group, a
dramatic drop in new orders for wind turbines from within the US market, as
discussed in more detail below. The US market for wind turbines has been
materially hampered by the global financial crisis, particularly the credit
market collapse and resultant lack of project and tax equity financing.
These market conditions have also, in many instances, caused Clipper's customers
to delay wind projects from 2009 into 2010 and beyond, thus delaying the
delivery of turbines and the receipts of progress payments from Clipper's
customers. Clipper has worked closely with its customers to negotiate the
deferral of deliveries while endeavouring to minimize the cash flow impact with
improved payment terms.
Clipper responded to the challenges presented by this recent severe economic
downturn by taking aggressive actions to conserve cash by cutting operating
expenses and manufacturing overhead costs, reducing inventories and
restructuring supplier contracts. Notwithstanding these actions, the Company's
liquidity and capital resources have been strained by the combined effects of
the external market forces described above and by the operating losses sustained
by the Company, primarily as a result of significant remediation programme
costs.
(ii) Current Remediation Programmes
In September 2008, Clipper identified a number of skin defects on the blades of
its turbines caused by a deficient manufacturing process at the blade supplier.
This defect in the manufacturing process was swiftly corrected in the production
of all new blades.
Clipper has implemented a field remediation programme for all previously
produced and installed blades, totalling approximately 1,200 blades.
As of 7 December, approximately 97 per cent. of the previously installed blades
had been repaired, and this remediation process is expected to be completed by
31 January 2010.
The direct and indirect costs of remediation programmes incurred since the
beginning of 2007 through 2009, including associated liquidated damage charges
for delayed commissioning and costs in respect of warranty obligations, is
expected to total over US$330 million.
(iii) Company financial position
The Clipper Group's consolidated cash position of US$105.8 million at 30 June
2009 had decreased to approximately US$40 million as of the end of September
2009 reflecting delayed receipts of several key milestone payments from
customers, continued cash spending to complete the remediation programmes, and
delayed closing of new anticipated business opportunities during the third
quarter. By the end of November 2009, the Clipper Group's consolidated cash
position was approximately US$33 million with a number of delayed receipts
outstanding.
Clipper continues to target full year revenue of approximately US$750 million
based on delivery of approximately 260 turbines (650MW) in 2009. However, while
all units have now been delivered and substantially paid for, customer delays in
commissionary schedules could result in the revenue recognition on some units
being deferred to 2010. The deferral of orders from 2009 into 2010, as
previously disclosed on 30 September 2009, will negatively impact recorded
revenue and contribution margin in the second half, thus operating income is
projected to be negative in the second half of 2009.
As stated in the Interim Results, the Directors confirm that they expect to be
able to deliver the Clipper Group's currently contracted order book with higher
sales pricing and lower component costs in 2010, relative to 2009. Currently,
average sales prices within the Clipper Group's order book for 2010 represent
more than a 10 per cent. increase compared to 2009 and turbine component costs
at year-end 2009 are expected to be at least 10 per cent. lower than costs at
year-end 2008.
Going forward, the Company's objective is to seek to grow its market share in
the U.S. wind market. It is also the Company's objective to move its margins
towards industry norms.
Furthermore, following the recently announced sale of the 70 MW Criterion
Project and associated turbine order, the Company is continuing negotiations
with various parties interested in purchasing turbines along with sites from its
10,000 MW portfolio, 1,200 MW of which are in the advanced stage.
These positive trends, coupled with the completion of the current remediation
programmes and the continued diligent management of operating expenses and
working capital, support the Directors' expectations, as stated in the Interim
Results, that the Clipper Group will generate a positive operating income in
2010.
Financial Effects of the Subscription
As outlined above, the Directors anticipate that the proceeds from the proposed
Subscription will enable the Company to significantly strengthen its balance
sheet and fund its ongoing working capital requirements to support growth in its
core wind turbine business.
Following completion of the Subscription, a Shareholder will, assuming he or she
tenders no Ordinary Shares in the Partial Offer, have his/her proportionate
voting interests in the Company diluted through the issue of the Subscription
Shares.
The Company proposes to raise GBP126,505,686 (gross) through the issue of the
Subscription Shares. The Subscription Shares (being 84,337,124 new Ordinary
Shares) will represent approximately 39.3 per cent. of the Company's Enlarged
Issued Share Capital immediately following Admission.
General Meeting
The Subscription is conditional on, amongst other things, the approval of
Shareholders in a General Meeting. A General Meeting to seek Shareholders'
approval will be held at 10 a.m. on 6 January 2010 at the offices of Lawrence
Graham LLP, 4 More London Riverside, London, SE1 2AU, United Kingdom.
Recommendation
The Directors consider the Subscription to be in the best interests of
Shareholders as a whole and unanimously recommend that Shareholders vote in
favour of the Resolution to be proposed at the General Meeting, as they have
irrevocably undertaken to do in respect of their own beneficial shareholdings of
22,514,135 Shares, representing approximately 17.3 per cent. of the existing
issued share capital of the Company.
DEFINITIONS
Admission means the admission of the Subscription Shares to trading on AIM
becoming effective in accordance with the AIM Rules for Companies;
AIM means the Alternative Investment Market of the London Stock Exchange;
AIM Rules for Companies means the rules for companies whose securities are
admitted to trading on AIM as published by the London Stock Exchange from time
to time;
Board means the board of Directors;
Company means Clipper Windpower Plc registered in England and Wales with company
registration number 5425635;
Directors means the directors of the Company;
Enlarged Issued Share Capital means the issued share capital of the Company
following Admission and assuming no exercise of options in respect for Shares
between the date of this document and Admission;
GM or General Meeting means the General Meeting of the Company to be held on 6
January 2010;
Group or Clipper Group means the Company, its subsidiaries and subsidiary
undertakings;
Interim Results means the interim accounts for the Group for the 6 month period
to 30 June 2009;
Ordinary Shares or Shares means the ordinary shares of GBP0.10 each in the
capital of the Company;
Partial Offer means the partial cash offer made by UTC to Shareholders made in
accordance with the terms of the Partial Offer Document;
Partial Offer Amount means GBP39,248,206.20;
Partial Offer Document means the document containing the terms of the Partial
Offer posted to Shareholders with this document;
Restricted Transaction has the meaning given to it in Appendix I;
Resolution means the resolution set out in the notice of GM;
Shareholders means holders of Ordinary Shares; and
Subscription means the allotment and issue of the Subscription Shares to UTC;
Subscription Agreement means the agreement between the Company and UTC dated 10
December 2009;
Subscription Amount means GBP126,505,686;
Subscription Offer has the meaning given to it in Appendix I;
Subscription Price means GBP1.50 per Subscription Share;
Subscription Shares means 84,337,124 new Ordinary Shares to be issued pursuant
to the Subscription Agreement;
Superior Transaction has the meaning given to it in Appendix I;
United States means the United States of America;
UTC means United Technologies Corporation; and
UTC Shareholding has the meaning given to it in Appendix I.
APPENDIX I
SUMMARY OF SUBSCRIPTION AGREEMENT
Set out below is a summary of some of the principal terms of the Subscription
Agreement:
1Conditions
1.1UTC has conditionally agreed to subscribe for the Subscription Shares for the
Subscription Amount. The Subscription is conditional upon, inter alia, the
Resolution being duly passed without amendment at the General Meeting and
Admission becoming effective. Other conditions include:
1.1.1antitrust approval in the United States;
1.1.2the options previously granted to BP International Limited and OEP Wind
Holdings LP being terminated;
1.1.3the specific warranties in relation to litigation, intellectual property
and insolvency and there being no material adverse change in the financial
condition or the business operations of the Group since 30 June 2009 (the "MAC
Warranties") being true and accurate at all times during the five-day period
prior to Admission, save that (i) if any of the intellectual property MAC
Warranties are untrue or inaccurate and (ii) unless it is reasonably likely that
the Group would be no longer able to design, manufacture, operate, monitor,
maintain or supply the Group's wind turbines or the Group's customers would be
no longer authorised to use such turbines, then the condition in this paragraph
1.1.3 shall be deemed to be satisfied in so far as it relates to those
intellectual property MAC Warranties only; and
1.1.4the Partial Offer being declared unconditional in all respects in
accordance with its terms.
2Break fee
2.1Other than where the Subscription Agreement is terminated as a result of
antitrust approval in the United States not being forthcoming, the Company shall
pay a break fee of one per cent. (1%) of the aggregate of the Subscription
Amount and the Partial Offer Amount.
3Non-solicitation
3.1From the date of the Subscription Agreement to the earlier to occur of the
Admission Date and the termination of the Subscription Agreement, the Company
(and any of its affiliates or representatives) shall not, inter alia, engage in
discussions or negotiations or enter into any agreement with any person
concerning any issuance or sale by the Company of Shares (or warrants, options,
equity securities or other convertible securities) to any person ( a "Restricted
Transaction"), and the Company and it affiliates shall cease any such existing
activities, discussions or negotiations except for ordinary course of business
grants under the Company's option plan (and any shares issues pursuant thereto).
There is a carve out which allows the Company to respond to unsolicited
enquiries from, or hold discussions with, any bona fide person that has
submitted (and not withdrawn) a written proposal in relation to a Superior
Transaction and to communicate the Superior Transaction to Shareholders, to the
extent that the Directors conclude, having taken appropriate legal and financial
advice, that not to do so would constitute a breach of their duties as Directors
of the Company. A "Superior Transaction" means a Restricted Transaction which,
if completed, would be superior to the Subscription from a financial point of
view and which the Directors are minded to recommend.
4Board representation
4.1At all times the minimum number of Directors shall be 9 and the maximum
number of Directors shall be 11. Immediately following Admission, there shall be
11 Directors, of which 5 shall be appointed by UTC.
4.2On Admission and for so long as the aggregate beneficial holding of Shares
owned by UTC and any of its associates (the "UTC Shareholding") represents at
least ten per cent. (10%) of the entire issued Shares, UTC shall be entitled to
appoint, remove or retain on the Board a number of Directors proportionate to
the UTC Shareholding (rounded up to the nearest whole number unless the UTC
Shareholding is less than fifty per cent. (50%) in which case it shall be
rounded down).
4.3For as long as UTC and any of its associates hold in aggregate fifty point
one per cent. (50.1%) or more of the issued Shares, the Board will to continue
to meet at least five times annually, the Board will consist of a minimum of 9
Board members and a maximum of 11 Board members and the Board will continue to
be responsible for formulating, reviewing and approving the Group's strategy,
budgets, major items of capital expenditure, acquisitions and disposals. The
Board will also remain responsible for succession planning, board appointments,
remuneration of executives and the Group's risk management strategy.
4.4Certain matters continue to be, subject to majority approval by those
Directors, from time to time, who have not been nominated by UTC ("Non-Investor
Directors"). Subject always to compliance with their directors' fiduciary
duties, the Non-Investor Directors will continue to have majority approval over
the appointment of any Non-Investor Director or the removal of any Non-Investor
Director other than for just cause, the entering into of any contract or
commitment or settlement with any associate of UTC or the granting of any
material rights in or over the intellectual property rights owned or used by
Group members to UTC or any associate of UTC, in each case outside the normal
course of the Group's business or otherwise than on arm's length terms, and the
enforcement of the Subscription Agreement by the Company.
4.5For as long as UTC and any of its associates hold in aggregate forty five per
cent. (45%) or more of the issued Shares (which percentage shall be calculated
excluding any Shares issued pursuant to the exercise of any employee stock
options after the date of the Subscription Agreement), the Company will and will
procure that no action is taken or resolutions passed by the Company and any
member of the Group in respect of the following matters, without the prior
written consent of UTC:
4.5.1the appointment or replacement of the President and Chief Executive
Officer;
4.5.2the entering into or termination of any arrangement, contract or
transaction outside the normal course of the Group's business which would be
material to the Group taken as a whole; and/or
4.5.3the entering into of a material transaction other than (a) the sale or
supply of wind turbines to Group customers in the normal course of business or
(b) the sale of project development assets, in each case only to the extent that
Board approval would not have been required (adopting the Board approval policy
applied over the past 12 months).
5Miscellaneous
5.1During a period of eighteen months from Admission and subject to certain
exceptions, UTC cannot sell any of its interest in the Company. In addition, UTC
is not permitted to acquire more than 49.5 per cent. of the Company during the
two-year period from Admission, save that in certain circumstances, including
circumstances relating to the Company's performance, that percentage increases
to 55 per cent. of the Company.
5.2If the Company proposes to make an offer or invitation to subscribe for or
purchase any Shares or other instruments (a "Subscription Offer"), subject to
all necessary resolutions in connection with the relevant Subscription Offer
having been obtained from the Shareholders, the Company shall afford UTC the
right, at its option, to participate in such Subscription Offer at the issue
price of such Subscription Offer pro rata to the aggregate holding of Shares of
UTC and its associates at the date of the Subscription Offer, provided that such
right shall only apply during the period of 5 years from Admission and only to
the extent that UTC, together with its associates, holds directly or indirectly
not less than 5 per cent. in aggregate of the issued share capital of the
Company at the date of the Subscription Offer.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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